Question 11 CloudData needs help pricing their IPO. There are 6 million shares to be offered, and informed investors can distinguish between 150 million high value firms (30% probability) and 50 million low value firms (70% probability). Informed investors request 2 million shares if high value. Uninformed investors always request 6 million shares because they cannot distinguish quality. What should be the Offering Price assuming allocation of shares proportional to petition (no book-building) and requiring for uninformed investors to break even? 12.39 20.31 10.32 15.87
Question 11 CloudData needs help pricing their IPO. There are 6 million shares to be offered, and informed investors can distinguish between 150 million high value firms (30% probability) and 50 million low value firms (70% probability). Informed investors request 2 million shares if high value. Uninformed investors always request 6 million shares because they cannot distinguish quality. What should be the Offering Price assuming allocation of shares proportional to petition (no book-building) and requiring for uninformed investors to break even? 12.39 20.31 10.32 15.87
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Question 11
CloudData needs help pricing their IPO. There are 6 million shares to be offered, and informed investors can
distinguish between 150 million high value firms (30% probability) and 50 million low value firms (70%
probability). Informed investors request 2 million shares if high value.
Uninformed investors always request 6 million shares because they cannot distinguish quality. What should
be the Offering Price assuming allocation of shares proportional to petition (no book-building) and requiring
for uninformed investors to break even?
12.39
O 20.31
10.32
15.87
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